Problem $4-$ Master Budgeting $(20$ marks$)$

Craney Corporation makes one product, and it provided the following information to help prepare the master budget for February:

The budgeted selling price per unit is $$110.$ Budgeted unit sales for January, February, and March are $11,350,12,550,$ and $17,950$ units, respectively. All sales are on credit.

Regarding credit sales, $30\%$ are collected in the month of the sale and $70\%$ in the following month.

The ending finished goods inventory equals $40\%$ of the following month's sales.

Each unit of finished goods requires $8$ pounds of raw materials. The ending raw materials inventory equals $40\%$ of the following month's raw materials production needs. The raw materials cost $$5$ per pound. Assume that $100,000$ pounds of raw materials are needed for production in March, and the cost of raw material purchases in January is $$46,210.$

Regarding raw materials purchases, $40\%$ are paid for in the month of purchase and $60\%$ in the following month.

The direct labor wage rate is $$30$ per hour. Each unit of finished goods requires $2$ direct labor$-$hours. Overhead is expected to be $$70,000$ per month, including $$20,000$ of amortization. Cash payments for direct labor and overhead occur in the month as the expenses are incurred.

Selling and administrative $($S&A$)$ expenses are budgeted to be $$40,000$ for each month. All S&A expenses are paid in cash in the month as the expenses are incurred.

The company expects to purchase $$150,000$ of equipment in February $($purchases paid in cash$).$

On February $1,$ the cash account balance is forecasted to be $$30,000.$ The company must maintain a cash balance of at least $$10,000$ at the end of each month.

The company has an agreement with a local bank that allows the company to borrow in increments of $$1,000$ at the beginning of each month. The interest rate on these loans is $18\%$ per year $($assume interest rate not compounded$).$ Interest is calculated on the monthly basis and paid the $1^{st}$ day of the following month. Any borrowed money repaid to the bank is paid on the last day of the month. Any borrowed money is repaid in multiples of $$1,000.$ The company would like to pay back the borrowings as soon as it can. At the end of January, the company will have no outstanding borrowings.

Required:

a$.$ Prepare a monthly schedule of cash collections for February. $(2$ marks$)$

b$.$ Prepare a monthly schedule of cash disbursements for raw material purchases for February $(8$ marks$).$

c$.$ Prepare a monthly cash budget for February $(10$ marks$).$

$5$